Shari’ah perspective on business opportunities : sale of agricultural equipment at inflated prices

Fatawa Question

Dear Dr. Kahf, Assalamu Alaikum, I hope this email finds you in best of shape. I am in Venezuela and, if you may, I need your opinion in a complicated business idea whether it is Halal or Haram. First let me give you an idea about Venezuela. Venezuelan government has tremendous restrictions on buying foreign currencies, as US dollar and Euro. There are only few numbers of products whose importers are supplied by dollars or Euros from the government, such as medical equipment, food commodities and other items the government deems as necessities. As a result importers buying products not supplied by dollars or Euros from the government, use the black market to buy dollars or Euros. The OFFICIAL exchange rate for the dollar is 1USD = 4.3 Bolivars. The dollar exchange rate in black market is 1USD = 16 Bolivars. The business idea is as follows : The Venezuelan government supplies US dollars at OFFICIAL Rate (4.3Bolivars) for agricultural equipment. My idea is to go Brazil and establish a company that buys agricultural equipment from the local market in Brazil (let’s call this company BraCo). Then my company here in Venezuela (let’s call it VenCo) would "buy" from my company in Brazil, BraCo, but for higher price. For example, let’s say BraCo bought a tractor from Brazil local market for 50,000 $. Then VENCO bought this tractor from BRACO for 150,000 $.Now, since a tractor is an agricultural equipment, Venezuelan government would lend VENCO 150,000 $ at official rate (4.3Bolivars). At this point, venco pays 150,000 $ to BRACO, and owes Venezuelan government 645,000Bolivars (or $ 150,000 * 4.3Bolivar / $). Now BRACO has 100,000 $ profit. This $ 100,000 are sold to Venezuelan black market at $ 1 = 16 Bolivar, for 1,600,000Bolivars. From these 1,600,000Bolivars, 645,000 are paid to the Venezuelan government for VENCO'S loan, and the rest, 955,000 Bolivar are pure profit. Is it permissible to do such a business ? My main concern is that I own both of the companies in Brazil and Venezuela that are nominally buying from each other. Please let me know your opinion. Jazak Allah khair, Sleiman

Fatwa

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Publication Date

2012-12-16

Main Subjects

Economics & Business Administration
Islamic Studies

No. of Pages

1

Data Type

Fatawa

Language

English

Record ID

BIM-732115

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